In most of the world, Santa Claus shows up only once a year. In Silicon Valley, however, he seems to have taken up permanent residence. Every day is Christmas here.

Technology stocks keep zooming upward. New issues routinely double or triple in value on their first day of trading. Entrepreneurs have an easy time finding backers. High-tech companies that barely exist are bought out for hundreds of millions. Best of all, everyone else now acknowledges what the people here have been saying for some time: The Internet will indeed reshape everything about our lives.

To the extent anyone is in control of that process, most live and work in this 70-mile-long, 10-mile-wide strip of land just south of San Francisco. But if the present is glorious and the long-term horizon truly wondrous for the inhabitants of Silicon Valley, the immediate future is causing some unease.

They're waiting for the bubble to burst and doom to arrive, at least temporarily. Some have been waiting a long time. "In such good times, never has there been such anxiety about the impending crash," said Bill Reichert, president of Garage.com, which funds start-up companies.

Reichert made that remark to a group of entrepreneurs at the Churchill Club, which hosts regular panel discussions on Internet issues, four months ago. Since then, the Nasdaq index, fueled almost entirely by tech stocks, has risen more than 40 percent. It rose briefly above 4000 for the first time on Thursday, a mere seven weeks after it first scaled 3000. Some Internet stocks, such as CMGI and DoubleClick, are up about 900 percent this year.

"People are desperately afraid of all the speculation. On the other hand, they're desperately afraid to be out of the game," said Len Baker, managing director of Sutter Hill Ventures. As a result, "the smarter ones are nervous and confused."

"Do I sleep well at night?" asked Roger McNamee, another top venture capitalist. "Not as well as I'd like to."

Tech stocks have been so outstanding for so long that investors everywhere are constantly wondering whether to pull out--or plunge in further. But the discussions here, where tech is created, have a special resonance.

Many Internet deals are born at Buck's restaurant, where the venture capitalists meet with would-be entrepreneurs and decide whether to invest in fledging firms. For eight years, Buck's has displayed and sold a book next to the cash register. The current selection, "The Internet Bubble," has been its all-time bestseller.

It's a curious book, an attack on the system that was written by two brothers who have profited from it: Authors Tony and Michael Perkins are the publishers of Red Herring, one of the many Internet financial magazines that have grown fat with dot-com ads.

"Their magazine is all about the glories of the Internet, but they did this book about the overvalued world of high-tech stocks and the coming shakeout," observed Buck's proprietor Jamis MacNiven. "It's a real head-scratcher."

But the Perkinses, who have talked about taking Red Herring and its accompanying Web site public next year, exhibit only the most obvious contradiction. In their book, they quote some of the leading venture capitalists and investment bankers, many of whom readily admit that the entire world of Internet valuations is out of whack.

"It's emotion, it's frenzy, it's the fad, and 90 percent of the companies should never have gone public and will go out of business or hit very hard times," venture capitalist Jim Breyer tells the authors.

Adds Andy Bechtolsheim, co-founder of Sun Microsystems and an early-stage investor in Internet companies: "There is no economic basis for these Internet stock valuations."

As for all those attempts to use newfangled means to evaluate a company's growth potential, such as measuring traffic to a site: "It's all [expletive]," confides Bruce Lupatkin, former head of research at the investment firm of Hambrecht & Quist.

The Perkinses estimate that the 133 Internet companies that have gone public since 1995 are overvalued by as much as $230 billion. Since the most recent figures in the book are from July, that number is undoubtedly much higher now.

Next to the stack of "Bubble" books in Buck's is a hand-lettered imperative: "Buy this book or go broke." The trouble is, so far it has been easier to go broke by staying away from the Net stocks than staying in.

Listen to one critic, lamenting that "companies received unprecedented valuations for businesses that were at best unproved and in some cases ill-conceived. . . . Every [public offering] was a concept deal, in which stock was desirable not by virtue of current revenues but because of its dizzying future."

That was Tony Perkins, writing in Red Herring in September 1996. Anyone acting on his advice then would subsequently have forgone a lot of money.

"We've been talking about this bubble for three years," said Jim Barksdale, the former chief executive of the browser company Netscape, whose debut in 1995--its stock price doubled on its first day--is considered to have been the true beginning of Internet stock mania. "All markets climb a wall of worry. That's the nature of a bull market. No worry, no market."

But isn't this market too good to be true?

"Perhaps," said Barksdale, "but that doesn't mean it still isn't true."

Others aren't so sanguine. "Everywhere you look there's signs of lunacy. Everywhere you look there's signs of speculation," said McNamee, a partner at Integral Capital Partners. "But what makes this so difficult is you could have been saying that six months ago, and six months before that. And you could be saying it six months from now."

A fresh example of the sort of madness that worries some people happened this week with Juno Online, an Internet service provider with 500,000 customers. On Monday, Juno announced it will offer a basic access service for free. The theory is, Juno will hold on to its half-million paying customers, while drawing to the new service some of the 2.9 million people who already use its free e-mail. The profit will come from the advertising these millions of customers will be exposed to. It's all quite hypothetical, but Juno's stock shot up from $17 to as high as $87 in two days before settling down around $46.

Other examples abound. In the past six weeks, the stock of Be Inc., the maker of an operating system that competes with Microsoft's Windows, has gone from $5 to as high as $40. Makers of Linux software, such as Red Hat, have been soaring as well--not because of any change in their business fundamentals, but simply because they, like Be, compete with Microsoft, and the software giant is struggling in its antitrust fight with the government. On its first day of trading earlier this month, the stock of VA Linux, another maker of the software, went up 700 percent.

That debut was extraordinary, the best on record, but the new-issues market has generally been torrid. From 1984 through 1998, according to one estimate, 7,000 companies went public. Only 33 of them doubled on the first day. Last year, more than 500 companies went public, the majority of them high-tech firms. More than 100 doubled.

"In early 1990s, a stock was hot if it went up two points its first day. If it went up six points, it was on fire. Now it goes up 100 points," said Dan Burke, an analyst with Gomez Advisors, a consulting firm. "This is incomprehensible for people with a deep history of the market. It defies anything they've ever seen. Younger people say, 'Let's ride.' What they don't know hasn't hurt them yet."

Older venture capitalists, who know there are such things as bear markets, admit they're bewildered.

"This is the most confusing time in the 26 years I've been doing this," said Baker of Sutter Hill. "There's this fundamental contradiction--there is the biggest financial speculation going on in many decades, many centuries, maybe ever. But the Internet is real--it's the biggest economic discontinuity since the invention of the printing press."

The consensus view of the publicly traded Internet stocks, held by such experts as Tom Gardner of the popular Motley Fool online financial advice site and superstar analyst Mary Meeker, is that 90 percent are overvalued but 10 percent are undervalued.

The trouble, of course, is that no one is sure which is in which group. America Online was left for dead a few years ago. Since then, it has doubled in value many times. Amazon.com is undervalued if it can make its dream of e-commerce domination work, but a turkey if it can't figure out a way to make a profit.

"There are companies that look overvalued or fairly valued that will win so huge that we will look back at these values and say, 'Those were the good old days,' " said Paul Deninger, chairman of the technology investment bank Broadview International. "But the vast majority of these companies are grossly overvalued."

What has prevented that second group of companies from deflating so far is the unending supply of cheap capital. It's easy to get a company funded here by venture capitalists, and then easy to take it public and raise more money. But since it's so easy, everyone's doing it--which means it's just as hard as ever to build something lasting.

The most successful tech companies have traditionally had core businesses that were hard for rivals to replicate. One reason Microsoft has always been highly valued is that it would be difficult to start an operating system company in your garage to compete with Windows. Microsoft had the market to itself.

"Management 101 involves erecting barriers to entry by a competitor. But if you can go from an idea to a public offering in 12 months at a multibillion-dollar valuation, the barriers to entry can't be very high," noted Deninger.

So the e-commerce companies want to erect non-technological barriers. They try to capture "eyeballs," to build a brand, to make a site no one will want to leave. But it requires lots of money to do this. The bubble bursts when these companies run out and can't get any more.

"When these companies have negative cash flow business models, where are they going to go for the next $150 million?" asked Deninger. "A day trader? No. We're already seeing a lot of debt, effectively junk bonds. Why? The companies can't raise equity."

He sees the money supply running dry at the end of next year, when the market starts saying, "We're not going to fund eight pet stores, we're going to fund the two best ones." At that point, there will be bankruptcies, something that no e-commerce company has actually experienced yet. Long before that, starting almost immediately, weaker companies will be forced to merge.

This is the conventional view--that sooner or later, for all the promise of the Internet, the bills will have to be paid. But there's a counter-current here that says this time, things are truly different. Sure, some companies will falter, but there will be no bubble-bursting worthy of the name.

"When the Spanish came to the New World, they found the gold that enabled them to build an empire," said Buck's proprietor, MacNiven. "Perhaps the Internet is like that. Perhaps it's like stumbling on free fuel."

It could be true, said Baker of Sutter Hill. This time could be different. "But history will tell you, it's never different in the fundamentals. It's different in the details. If I were going to bet, I would bet on history."

If the bubble does explode in some unseemly fashion, weep not for Silicon Valley. Not only do the folks here know exactly how fragile all this is, as "The Internet Bubble" makes clear, but many long ago made their bundle.

"Their profits are locked in, which may be one reason they were so brazen in their admissions to us," said Michael Perkins. "Arguably it is a minority who show any conscience about this. . . . It's the public investor who has to worry about the daily movement of stock prices and whether they can get out in time. It's a sucker's game for them."

McNamee of Integral Capital argues that the real issue in Silicon Valley isn't so much the bubble as a loss of perspective about these soaring stocks.

"There's an increasing sense of entitlement," he said. "This is as weird as it gets, but a fair number of people here believe this is normal."

That, of course, is one of the traditional signs of a bubble about to burst. Meanwhile, the market continues, as always, to go up.

CAPTION: Robert Weber, right, of Pescadero Ventures talks on the phone as he sits with Jim Swanson of Los Altos Incubation at Buck's, a dealmaking hotbed.